The applicant for a documentary credit is the buyer that asks its bank to issue the credit. An applicant is not a party to a documentary credit.
- Issuing bank − The bank acting for the applicant by issuing or opening the credit on the applicant’s behalf. The issuing bank gives an undertaking to reimburse a nominated bank that has honoured or negotiated compliant documents under the terms of the credit, even if the applicant is unwilling or unable to pay. It also gives an undertaking to honour a complying presentation that is made to it directly by the beneficiary.
- Beneficiary − A company or individual to whom the credit is issued, in most cases the provider of the goods, services or performance.
- Advising bank − The bank through which the credit is transmitted by the issuing bank for advising to the beneficiary.
- Confirming bank − A bank that adds its additional undertaking to that of the issuing bank and thereby undertakes to honour or negotiate a complying presentation made to it by the beneficiary. If a bank confirms a credit, the documentary credit is commonly known as a ‘confirmed letter of credit’.
- Nominated bank − A bank at whose ‘counters’ a beneficiary may make a presentation of documents for honour or negotiation. Each credit must indicate whether it is available with the issuing bank or with a nominated bank or with any bank (in which case, any bank is a nominated bank).